From 2003 to 2005, researchers at the University of Illinois at Chicago Institute of Government and Public Affairs explored the effects of changes in Medicare reimbursement on hospital use of nursing resources and patient outcomes.

Key Findings

Changes in Medicare reimbursement on the order of 10 percent had no statistically or materially significant relationship on:

hospital use of nursing resources

outcomes of Medicare patients

outcomes of non-elderly (i.e., non-Medicare) patients

Key Conclusions

Medicare's geographic reclassification program, which increases reimbursement to hospitals with higher than average labor costs, is not serving its intended purpose. Increases in reimbursement under the program did not lead hospitals to hire more nurses or improve patient outcomes, as the program was designed to do.

The link between Medicare reimbursement and patient outcomes is not strong. The research team examined changes in Medicare reimbursement "on the order of magnitude of 10 percent, which is not a trivial change," and found no evidence that patient outcomes were affected.

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